Minimum Wage background: a fact-filled note

In what has become an increasingly fact-free argument, I thought it might be time to take the Way-back Machine (very timely considering the Sherman film is in theaters right now) and find out more about Washington’s minimum wage. How did Washington end up with the country’s highest minimum wage? How come we still have restaurants opening every day, when clearly, its impossible?

Washington stepped off the national minimum wage ladder for the first time in 1988, with the enactment of Initiative 518. I-518 proposed to raise the then minimum wage from $2.30 to $3.85 effective 1/1/89, and then going straight to $4.25 effective 1/1/90. It removed the exception for tipped labor, and agricultural labor. The minimum wage, as proposed, would apply to all workers across the board, with a limited exception for workers below the age of 16. The statement against I-518 from the 1988 Washington State Voter’s Pamphlet follows:

Statement against I-518

Will HURT THE WORKING POOR

Initiative 518 will reduce jobs, increase inflation and hurt the working poor. Employers recognize that it is almost impossible to keep full-time employees by paying the state or federal minimum wage (even farm workers in Washington average almost $5 per hour). But a reasonable minimum wage does permit employers to provide entry-level and part-time supplemental income jobs which would otherwise be reduced. This year the employer community supported a 40% increase in the state minimum wage but the bill died in the legislative debate.

When the minimum wage is increased, impacted employers reduce working hours, increase mechanization, and reduce service to control costs. They also pass the cost of any wage increase to consumers in the form of inflation.

Tips are considered wages by state and federal law, but this initiative ignores that fact and, as a consequence, employers of tipped workers will be unfairly penalized millions of dollars resulting in higher menu prices and loss of employment opportunities for unskilled job applicants.

MEANS FEWER PART-TIME JOB OPPORTUNITIES

Supporters of the initiative argue that an increase above the federal minimum wage will help heads of larger households. But an initiative which outlaws any job that doesn’t pay enough to support a family of three, does a great disservice to the vast majority of minimum wage earners who are single, work part-time, and live in households which earn significantly above the poverty income level. For these families the increase means fewer part-time jobs and entry-level positions.

We can target programs to help the poor without reducing job opportunities for everyone else.

VOTE “NO” ON 518

Rebuttal of for
Economists don’t agree with initiative supporters. As the New York Times acknowledged, “there’s a virtual consensus among economists that the minimum wage is an idea whose time has passed. Raising the minimum wage by a substantial amount would price working poor people out of the job market.”

For example, seasonal agricultural workers are impacted by Initiative 518. Those unable to produce at a production rate equal to the minimum wage won’t be allowed to work.

The initiative passed 76.55% yes, 23.45% no. The result was predictable. Bands of hoodlums roamed the land, raping and pillaging as they stole food and goods from the now abandoned restaurants and small businesses. Nearly all business in Washington came to a halt, as hundreds of thousands of small businesses and entrepreneurs left the state for the freedom of Texas, Alabama, and South Carolina. Children went hungry, and families were forced to rely on their own resources, growing food in tiny plots guarded by armed vigilantes.

What? No? Really?!

Do the arguments in the voter’s pamphlet sound familiar? They should: they are the same arguments repeated today by members of the WRA and the NFIB. I-518 raised the minimum wage from $2.30 to $4.25 over 24 months, an increase of almost 100%. The result was unprecedented economic prosperity in Washington, making it one of the most desirable places to live, work, and start a business. Incomes were high and taxes were low. Small businesses, and restaurants in particular, prospered as never before with much more money sloshing around in the economy. Every economic indicator took off. But that is not the end of the story. Coming soon, I-688!